US embassy cable - 05MANILA5068

UNCLAS SECTION 01 OF 03 MANILA 005068 
 
SIPDIS 
 
STATE FOR EAP/EP, EB/IFD, EB/TPP/BTA/ANA, EB/TPP/MTA/IPC 
STATE ALSO PASS USTR FOR BWEISEL AND DKATZ 
STATE ALSO PASS USAID, OPIC, USDA 
TREASURY FOR OASIA FOR AJEWELL 
USDOC FOR 4430/ITA/MAC/DBISBEE 
USDOC PASS USPTO FOR PFOWLER 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ETRD, KIPR, RP 
SUBJECT:  USTR VISIT LAYS GROUNDWORK FOR JANUARY SPECIAL 301 
IPR OUT-OF-CYCLE REVIEW 
 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
1.  (SBU)  Summary:  USTR, Department of Commerce (DOC) and 
U.S. Patent and Trademark Office (USPTO) officials, 
accompanied by econoffs, met with congressional leaders and 
GRP officials to discuss IPR protection and the upcoming 
Special 301 Out-of-Cycle review (OCR).  The GRP is keen to 
get off the Priority Watch List, but faces an uphill battle. 
IPR enforcement agencies remain stalled by a general lack of 
authority and resources.  Proposed special IPR courts alone 
might not lead to improvement because appeals would place IP 
cases back into the old system.  Recent proposed legislation 
on pharmaceutical patents pose a weakening of a generally 
strong IP code.  However, the Intellectual Property Office 
continues to make progress and a visible decline in the 
overall availability of pirated and counterfeit goods were 
noted.  Removal from the Priority Watch List is a 
possibility, but more action is needed before January.  End 
Summary. 
 
2.  (U)  U.S. Trade Representative (USTR) Director for 
Southeast Asia and Pacific Affairs David Katz, U.S. 
Department of Commerce (DOC) Deputy Director David Bisbee 
and U.S. Patent and Trademark Office (USPTO) Senior Counsel 
Peter Fowler visited Manila October 16-17 to meet with RP 
Congressional leaders and executive branch counterparts in 
preparation of an upcoming 301 IPR Out-of-Cycle Review 
(OCR), which will determine whether the RP remains on the 
Special 301 Priority Watch List.  The meetings focused 
primarily on IPR protection and enforcement, although they 
touched on broader economic issues as well (reported in 
septel). 
 
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IPR ENFORCEMENT HAMPERED BY LACK OF RESOURCES AND AUTHORITY 
--------------------------------------------- -------------- 
 
3.  (SBU) Officials at the Optical Media Board (OMB) and the 
Bureau of Customs expressed frustration with an overall lack 
of resources and authority.  OMB reported that their 
staffing, resources and budget remain constant, but that 
rapidly rising utility costs are taking a toll.  Of their 
USD 428,000 dollar budget, only about USD 89,000 is 
available after paying personnel and operating costs.  The 
OMB proposes nearly doubling its staff from 66 to 111 to 
effectively implement its mandate.  For OMB, interagency 
cooperation is another stumbling block.  Its representative 
highlighted one recent case in which they tried to work with 
the National Bureau of Investigation (NBI), but the planned 
raid ultimately failed because NBI acted without OMB. 
 
4.  (SBU).  The IPR enforcement unit at the Bureau of 
Customs is still in limbo.  The unit was established in 
2003, took one year to implement and still is not 
functional.  The unit has no fixed budget nor permanent 
staff.  Currently, the unit is working with seven agents and 
one lawyer.  Customs officials conservatively estimate that 
they need at least seven lawyers and 25 to 30 agents to be 
effective. 
 
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IPR COURTS ON THE HORIZON 
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5.  (SBU)  The GRP's Supreme Court plans to implement three 
special IPR courts in metro Manila soon, according to Ismael 
Khan, Chief of the Court's Public Information Office.  Three 
judges will be designated with exclusive criminal and civil 
jurisdiction over IPR cases.  The Court does not plan to 
create a separate IPR appellate court; existing appellate 
courts will accommodate IPR appeals so once a case is 
appealed, prosecutors will encounter long delays once again. 
There are over 1400 IPR cases pending with 95 percent of 
cases concentrated in Manila.  Khan commented that if the 
caseload becomes too heavy, the Supreme Court will simply 
designate more IPR courts.  Khan emphasized that it is 
important to try and accomplish these changes within the 
existing judicial framework rather than through Congress as 
legislative initiatives would be time consuming and possibly 
unsuccessful. 
 
6.  (SBU)  Comment:  For the GRP and the Supreme Court, 
creation of IPR courts is a key initiative with respect to 
IPR.  While the current initiative demonstrates progress, 
there is a risk that it could become a bureaucratic 
reshuffling instead of a more permanent, effective 
legislative change.  The fact that there is no provision for 
a special IPR appellate court may render the IPR courts 
ineffective.  End Comment. 
 
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U.S. STAKEHOLDERS WORRIED ABOUT PHARMACEUTICAL POLICY 
--------------------------------------------- --------- 
 
7.  (U)  In discussions with U.S. IPR rights holders, Katz, 
Fowler and econoffs heard concerns about a recent bill 
sponsored by Senator Roxas to amend the Intellectual 
Property Code of the RP, with respect to patents and 
parallel imports for pharmaceuticals.  Roxas' proposal would 
change the IP Code so that the period of patent protection 
begins after the product has been introduced anywhere in the 
world rather than just in the RP.  Pharmaceutical companies 
believe that this will essentially cut the time frame for 
patent protection in half to 10 years.  The Roxas bill will 
also permit pharmacies and other entities licensed to 
distribute pharmaceuticals to avail of parallel import 
schemes.  Currently, only government facilities and programs 
can legally import drugs from countries that do not provide 
patent protection. 
 
8.  (SBU)  The Intellectual Property Office (IPO) and 
Philippine pharmaceutical representatives co-sponsored a 
forum to discuss the Roxas bill, which by coincidence took 
place just after the USTR/USPTO visit.  Embassies were not 
invited, but preliminary reports indicate that the dicussion 
was heavily biased toward the Roxas bill.  The IPO told us 
that the discussion covered an "educational agenda."  (Note: 
Embassy will closely monitor developments on this proposed 
legislation as it is likely to become a key issue during the 
Special 301 review.  Embassy is seeking a meeting with Roxas 
to explain our concerns with his bill.  End note.) 
 
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IPO INCHING FORWARD 
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9.  (SBU)  Director General Adrian Cristobal of the IPO 
emphasized that the focal point now for the GRP's IP 
strategy is the IP courts.  IPO is also committed to 
automating its patent registration and creating a searchable 
database, which will greatly enhance record keeping.  IPO 
reports an annual four percent average increase in overall 
filing rates for patents and trademarks.  IPO officials are 
working with the Central Bank to implement an electronic 
patent filing system, which they hope to have online next 
year.  Cristobal noted that the majority of trademark 
applications are made by Filipino applicants with only about 
ten per cent attributed to foreigners. 
 
10.  (SBU)  Cristobal stated that GRP interagency 
cooperation is improving.  IPO now has a full-time 
secretariat chaired by a lawyer and regular case review 
 
SIPDIS 
meetings with prosecutors.  Cristobal noted that key people 
are beginning to recognize that piracy affects domestic 
producers.  Cristobal mentioned that the National 
Telecommunications Commission (NTC) is talking about forming 
its own IP unit, but IPO is working with them to try and 
keep the IP function within IPO while possibly installing an 
IPO technical expert at NTC. 
 
11. (U)  USTR stressed to Cristobal that the deadline for 
interested party submissions for the OCR is December 2 so 
that the review can be completed in January. 
 
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THE VIEW FROM CONGRESS 
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12.  (SBU)  In a meeting with Senator Ralph G. Recto, Senate 
Committee Chairman on Ways and Means, USTR stressed the 
importance of IPR protection to overall economic growth and 
the investment climate.  Recto's position was that the 
necessary laws have been passed and now it is a matter of 
implementation.  He stated that the GRP's actions 
demonstrate that they are fighting IPR violators.  He added 
that he is not aware of any large-scale production or 
manufacturing of pirated or counterfeit goods in the 
Philippines and that illegal goods found in the Philippines 
come from Malaysia, China and other countries in the region. 
 
13.  (SBU)  Econ Counselor, Commercial Counselor, Katz, 
Fowler and Bisbee reviewed the IPR agenda at a private 
dinner with key members of Congress from the House 
Committees on Trade and Industry, Appropriations, Public 
Information and Ways and Means.  These members of congress 
were concerned about how the Philippines' Priority Watch 
List status reflects badly on the investment climate.  They 
expressed interest in working with the GRP, especially the 
IPO, is supporting stronger enforcement as well as meeting 
with industry representatives with a stake in better IPR 
enforcement. 
 
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VISIBLE REDUCTION OF COUNTERFEIT AND PIRATED GOODS 
--------------------------------------------- ----- 
 
14.  (SBU)  The USTR/USDOC/USPTO team met with the 
Intellectual Property Coalition, which includes Philippine 
industry representatives who support stronger IPR measures, 
to discuss general IPR issues and tour a local shopping mall 
notorious for the sale of counterfeit goods (including 
apparel, sunglasses, and cellular phones) and pirated 
optical media (DVDs, music CDs, and computer software). 
While such goods are still widely available, USG officials 
noticed a decline in the overall quantity in comparison to 
their first visit in February.  A second mall visit the next 
day affirmed this impression. 
 
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COMMENT 
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15.  (SBU)  The visit by USTR, DOC and USPTO provided a good 
preliminary look at where the RP stands with respect to the 
upcoming OCR.  There is a real interest in the GRP, starting 
with the President, to get the RP off the Priority Watch 
List.  However, there are still some key concerns that need 
to be addressed, particularly the implementation of an 
effective IPR court system and overall law enforcement.  IP 
legislation is strong in the RP, but implementation is 
crucial.  The team did see progress, but it is not yet 
evident whether it is enough to justify removal from the 
Priority Watch List.  The Roxas bill and its potential to 
weaken patent protection for pharmaceuticals is concerning 
and will be monitored in coming weeks.  In the meantime, the 
visit heightened GRP awareness and emphasized the 
opportunities inherent in the upcoming OCR. 
 
JONES